27 April 2010
The Federal Government has announced a tightening of the foreign investment rules, as they relate to residential real estate and foreshadowed new civil penalty provisions, for vendors and real estate agents.
The Government says its objective is to ensure that foreign non-residents can only invest in Australian real estate if that investment adds to the housing stock, and that investments by temporary residents in established properties are only for their use whilst they live in Australia.
All temporary residents seeking to purchase an existing property in Australia will now be brought within the Foreign Investment Review Board (FIRB) notification, screening and approval process.
Temporary residents will be required to notify, be screened by or be approved by FIRB. The changes ensure that temporary residents are subject to the same compulsory notification, screening and approval requirements required of foreign non-residents.
In addition, temporary residents who are approved will now have to:
- compulsorily sell the established property they have bought when they depart Australia; and
- be required, where undeveloped land has been purchased, to commence construction on that land within 24-months or have the land compulsorily sold.
The Government has not announced a roll back of last year’s reforms to make it easier for foreign non-residents to invest in new housing stock. That is, foreign investment in new dwellings acquired-off-the-plan (before construction commences or during the construction phase) or after construction is complete will normally be approved (the former 50 per cent cap on foreign investment has not be reinstated).
The definition of “new dwelling” announced in December 2008 remains in place. Dwellings are new if they:
have not previously been sold (that is, they are purchased from the developer); and
have not been occupied for more than 12 months.
Prior to the reforms of December 2008, foreign investment restrictions had made it impossible to sell an apartment to a foreign investor once it was tenanted. The Urban Taskforce has been strongly defending these reforms and we are glad that they are still in place.
The Federal Government is planning to impose “civil penalties” on vendors and real estate agents when the purchaser has breached foreign ownership rules. However, details of these arrangements are far from clear. We’re concerned that vendors could be made legally responsible for checking the immigration status of home purchasers. We will be pursuing this issue.
The government’s media release is available here.